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New York Moves Forward with Three Important Environmental Initiatives on Climate Change, Property Taxes and Brownfields

Client Advisory

July 7, 2008

New York is moving forward with three important environmental initiatives, implementation of the Regional Greenhouse Gas Initiative (“RGGI”), reform of the Brownfield Cleanup Program and creation of a property tax credit for green roofs. 

Implementation of RGGI

RGGI, an agreement among northeastern states to address climate change through a regional cap-and-trade system, applies to fuel-fired power plants with a capacity of 25 megawatts or greater. Regulated owners or operators of such plants are required to purchase one emission allowance for each ton of carbon dioxide that the plant produces during a control period. The first control period runs from January 1, 2009 through December 31, 2011 and regulated units must possess enough allowances to cover their emissions by the end of that period. Three-year control periods will follow. 

In May 2008 the New York State Department of Environmental Conservation and New York State Energy Research and Development Authority, which will actually run New York’s auctions, released revised regulations to implement RGGI.[1] Finalization of these regulations is essential because the state will begin auctioning New York’s roughly 64,000,000 emissions allowances (each representing one ton of carbon dioxide) in December 2008, followed by quarterly auctions. Other RGGI states will begin auctions in September 2008. Owners or operators of power plants, and anyone wishing to participate in the auctions, must open accounts to hold allowances before participating in auctions.

Property Tax Credit in New York City for Green Roofs

The New York State Legislature has passed a straight-forward property tax credit for building owners (including co-ops and condos) in New York City that install green roofs.[2] The City’s Department of Finance may certify a one-time credit of $4.50 per square foot of green roof, limited to the lesser of $100,000 or the property tax liability of the building. Working with an architect or engineer, a building must install waterproofing, insulation, drainage, soil and drought-resistant plantings on at least fifty percent of the usable roof area. The building must also commit to maintain the green roof for at least three years. For buildings already considering rooftop gardens, a sought-after amenity for residents, the property tax credit may finally make the idea economically feasible.

Reform of the Brownfield Clean Up Program

The State Legislature created the Brownfield Cleanup Program in 2003 to allow owners and operators of brownfields[3] to earn liability protection and tax credits through remediation and redevelopment. The tax credits, ranging from 10 to 22 percent, varied based on the location of the brownfield, type of owner and level of cleanup. The credits were based on both the costs of remediation and development and were refundable (meaning that the state would provide a check to the applicant to the extent that the credit exceeded tax liability). Faced with soaring costs to actually award such tax credits, the New York State Department of Environmental Conservation began tightly restricting applications, leading to some court challenges,[4] and in 2008 the State Legislature imposed a moratorium on new applications. 

The reform legislation, passed by the State Legislatures in June 2008, limits the tax credit in two important ways for sites that are admitted to the program after June 23.[5] First, the tax credit for development costs (the “tangible property credit”) will be limited to $35,000,000 or three times the costs of remediation (the “site preparation credit” and “on-site groundwater remediation credit”), whichever is less.[6] For development of manufacturing facilities, this cap is raised to $45,000,000 or six times the costs of remediation. 

The reform legislation also increases the tax credit for remediation, ranging from 22 to 50% based on the level of cleanup achieved. Developers of brownfields are likely to welcome the reform in hopes that the state will begin processing applications, certificates of completion and tax credits more swiftly. And, for genuinely contaminated sites, the Brownfield Cleanup Program will now become even more lucrative.


Questions regarding this client advisory may be directed to Christopher Rizzo at (212-238-8677, rizzo@clm.com), Christine A. Fazio at (212-238-8754, fazio@clm.com) or Zara F. Fernandes (212-238-8827, fernandes@clm.com).


Endnotes


[1] The Department of Environmental Conservation’s regulations will be located at 6 NYCRR Part 242.   The New York State Energy Research and Development Authority’s regulations will be located at 21 NYCRR Part 507.

[2] N.Y. Real Property Tax Law § 499-bbb. 

[3] “Brownfield” is defined as “any real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant.” N.Y. Envtl. Conserv. Law § 27-1403.

[4] For example, a trial court in Onondaga County recently found the DEC’s use of its eligibility guidelines to be arbitrary and capricious. Destiny USA Development LLC v. New York State Department of Environmental Conservation, Index No. 08-1015 (Sup. Ct. Onondaga County 2008). Other N.Y. courts, however, have upheld the DEC’s use of these guidelines.

[5] Senate No. 8717; Assembly No. 11768.

[6] N.Y. Tax Law § 22(a)(3-a).



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
© Copyright 2008


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